Energy intensive industries will be exempted from contributing towards subsidies for low carbon and renewable generation via the contracts for difference (CfD) scheme.

The department for business, energy & industrial strategy (BEIS) said this will save 130 eligible companies around £100m a year. Other businesses will pick up the tab.

According to government figures, the measure will add £900/year to an average medium business electricity bill in 2017/18, rising to £1,600 the following year. By 2021 that will have risen to £3,200 per annum, based on a business using 11GWh per year.

The CfD scheme replaces the renewables obligation (RO) and pays generators with contracts a guaranteed price for producing power. The so-called strike price varies by technology. While CfD costs currently make up small fraction of the overall power bill, they are set to rise significantly over coming years as low carbon plant is constructed and commissioned.

Government announced the plan to protect energy intensive industries from rising policy costs in 2011. It consulted again on those plans last year. With legislation now laid for the CfD element, BEIS said it was negotiating potential exemptions for other support levies, the feed in tariff and the RO, and would make an announcement ‘in due course’.

While some business groups will complain that they are being burdened with more policy costs, energy minister Jesse Norman said that government needed to support heavy industry and its contribution to UK GDP.

“These industries are worth £52 billion to the UK economy, support 600,000 jobs and produce essential products that people use every day,” said Norman. “That is why we have taken this action to support them.”